HAPPY NEW YEAR TO ALL READERS OF THE BLOG!
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MARKETS UPDATE (8:00 pm EST) In my last post on the broad stock market (Dec. 17), I wrote: "The DOW did not turn down for a lower low as I had expected, and instead it rallied to new all-time highs. This means we will have to accept Nov. 20 as an unusually brief one-week decline to a final medium-term cycle bottom in the DOW, along with the Nov. 21 lows in the S&P 500 and NASDAQ as (normal) bottoms for their respective medium-term cycles. From these bottoms, new cycles rallied, and the DOW made a new all-time high (48,886 last Friday). The S&P 500 and NASDAQ, however, did not make new all-time highs last week, and all three indices MAY be rolling over this week. I emphasize "maybe" because this is the week before Christmas, and equity markets often manifest a bullish "Santa Claus" rally at this time." Well, the "Santa Claus" rally did indeed have another upsurge after my comment. All three indices rallied up from Dec. 17, with the S&P 500 hitting a new all-time high on Friday. The DOW and NASDAQ, however, did not make new all-time highs, so our intermarket bearish divergence signal persists. We will see if the rally continues into New Year's Day this Thursday. If all three indices make new all-time highs next week, it could be at least a short-term bullish sign for this new medium-term cycle in equity markets. On the other hand, if the bearish divergence continues, this market could roll over and begin a significant correction down. I am still on the sidelines of this market. Both gold and silver have been surging to new all-time highs. I had been expecting gold to make a steep correction down to a longer-term 2.5-year cycle bottom, but it appears that cycle is being bypassed for a longer 4-year cycle. If this is true, gold is bullish, and any serious correction (to the 4-year cycle bottom) will be delayed. We should now be watching for the next medium-term cycle bottom in gold for a possible spot to buy. The medium-term cycle labeling is currently ambiguous. A new cycle may have started either on Aug. 20 or Oct. 28. If it began on Aug. 20, it is an old cycle and ready to correct down to a final bottom. An Oct. 28th start, however, would make the cycle young and prone to more rallying. I will remain on the sidelines of gold until this labeling becomes clearer. Silver's rally has truly gone parabolic. Yesterday's intraday price surged to $86 before falling back to $78. It's hard to say when this price will top out, especially since we have no significant reversal zones until the second half of January 2026. Nevertheless, parabolic tops are highly susceptible to sudden, steep crashes. It's important to note here that silver is now very late in a long-term 18-year cycle (that began in Oct. 2008). We could now be seeing a final "blow-off" top to this cycle, and that should be followed by a steep correction (20% - 30% or possibly more). It would be foolish to chase this rally now. The safest trading strategy at this point would be to wait for the 18-year final corrective bottom to buy (or possibly attempt to sell short near the cycle top - a risky endeavor in a parabolic market). I am remaining on the sidelines of silver for now. Crude oil most likely started a new medium-term cycle with its Dec. 16 low at $54.89 (Feb. contract chart). Young cycles always start bullish, but the overall trend of this market is still bearish. This means any rally could top out early and resume the downward trend. The big question now is whether or not that Dec. 16 low also corresponded to a longer-term cycle low. If it did, crude prices could be starting a significant longer-term rally. If not, the current rally could top out soon and turn back down towards a long-term cycle bottom well below $54.89. There are currently two downsloping upper trendlines in the chart of crude oil. A break and close above both would suggest the more bullish scenario described above. Those lines are presently around $70 and $73 and falling. If prices stay below those lines, crude could roll over and fall lower into the first few months of 2026. I am remaining on the sidelines of crude oil for now. WISHING HAPPY HOLIDAYS TO ALL READERS OF THE BLOG!  UPDATE ON CRUDE OIL (11:30 pm EST)
We are well into the current medium-term cycle in crude oil. In fact, the final bottom to this cycle is now due, and it may have already happened with Tuesday's low at $54.98 (Jan. contract chart). That low was in the center of a general reversal zone (Dec. 11- 22) as well as one specifically for crude (Dec. 9 - 18). There is still time, however, for prices to push lower tomorrow or next Monday, or perhaps form a double bottom to Tuesday's low. It may be a good time to go long in crude, as the start of a new cycle is typically bullish; however, we need to consider a few other factors at this time. The current medium-term cycle started with a low on Aug.13 at $60.46. This cycle has clearly been bearish as it has been trending down from that starting point. Tuesday's price even went lower than the October low of $56. Some longer-term cycles in crude also seem to be pointing down right now. This suggests that any new medium-term cycle rally could be minor or short-lived before the downward trend resumes. A move above $70 might change this bearish view, but until that happens, I think I will stay on the sidelines of crude and perhaps consider short-selling any rallies into resistance levels or reversal zones. UPDATE ON THE BROAD STOCK MARKET (11:30 pm EST)
In my last post (Nov.28) on the broad stock market, I wrote: "...we are well into the current medium-term cycles in all three broad stock market indices (DOW, S&P 500, NASDAQ), and we are waiting for the final corrective descent into the final cycle bottoms for all three. That corrective fall should last 2 -5 weeks. Both the S&P 500 and NASDAQ satisfied that requirement with last Friday's lows, but the DOW did not. This makes me think the DOW will turn down before making a new high and push lower to its final cycle bottom soon." The DOW did not turn down for a lower low as I had expected, and instead it rallied to new all-time highs. This means we will have to accept Nov. 20 as an unusually brief one-week decline to a final medium-term cycle bottom in the DOW, along with the Nov. 21 lows in the S&P 500 and NASDAQ as (normal) bottoms for their respective medium-term cycles. From these bottoms, new cycles rallied, and the DOW made a new all-time high (48,886 last Friday). The S&P 500 and NASDAQ, however, did not make new all-time highs last week, and all three indices MAY be rolling over this week. I emphasize "maybe" because this is the week before Christmas, and equity markets often manifest a bullish "Santa Claus" rally at this time. Such a rally could push all three indices higher and negate the current bearish divergence between them. But the market could also be headed down from here. Last week's highs were inside a general reversal zone (Nov. 10 - 22). So the tops could be in for a significant correction down. Until the current bearish divergence signal in this market is negated by both the S&P 500 and NASDAQ making new all-time highs, I am not comfortable going long, even in this early phase of the new medium-term cycles. And as I've mentioned before, we shouldn't forget that several longer-term cycles are due soon, which could bring about a very severe correction in equity markets. That correction could start any time now. For these reasons, I am remaining on the sidelines of the broad stock market for now. |
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